Accounts and Notes Receivable:

An allowance for doubtful receivables is provided for estimated losses expected to be incurred in collec-
tion. The estimated losses are based on historical collection experience and a review of the status of existing
receivables.

Inventories:

Inventories are stated at cost, which is determined using the first-in, flrst-out method.

Plant:

Property, plant and equipment is stated principally at cost at date of acquisition or fair value at date of
donation in the case of gifts. Consistent with generally accepted accounting principles for colleges and uni-
versities, depreciation is not provided for the cost of plant assets, except for those of the hospital. Deprecia-
tion of the cost of the hospital's plant for 1980, in the amount of $2,598,000 is computed on the straight-line
method over the estimated useful lives of the assets. The balance of the fund groups in the plant fund in-
cludes $29,265,000 of unexpended plant funds at June 30, 1980, after expenditures for plant facilities of
$29,318,000 during the year.

Operating Transfers from State's General Fund:

A substantial portion of the higher education and University Hospital funds' current unrestricted ex-
penses, including substantially all current payments for retirement costs, are funded through appropriations
from the general fund at the time the expenses are paid. The excess of retirement costs provided over the
amounts currently funded, in the amount of $59,984,000, has been accrued in the combined balance sheet of
the higher education and University Hospital funds; however, the resources for payment of the accrued re-
tirement costs are not expected to be provided until the retirement costs are paid. Accordingly, the deficiency
in the higher education and University Hospital funds' current unrestricted fund balance, to the extent it re-
mains at an amount lower than the accrued retirement costs, is expected to be funded through future operat-
ing transfers from the general fund.

3. Budgeting and Budgetary Control:

Summarization of the budgets adopted by the General Assembly for the "budgetary" general, special
and federal funds are presented in the combined statement of revenues, expenditures and encumbrances,
other sources and uses of financial resources and changes in fund balance—budget and actual—budgetary
general, special and federal funds. For purposes of budgeting, the State's budgetary fund structure and ac-
counting principles differ from those utilized to present financial statements in conformity with generally
accepted accounting principles. A summarization of the material differences (amounts expressed in
thousands) for the year ended June 30, 1980 follows:

Deficiency of revenues over expenditures, encumbrances and other sources and uses of
financial resources — budgetary general, special and federal funds ...............	$(73,875)
Deficiency of budgetary revenues over expenditures, encumbrances and other sources
and uses of financial resources classified in proprietary funds in the financial state-
ments ................. ..............................................	35,321
Excess of revenues over expenditures of transportation debt service funds not included
in budgetary funds .......................................................	54,539
Net change in encumbrances included in budgetary funds ........................	6,788
Transfer from Maryland Transportation Authority, recorded as an equity transfer in
the financial statements and revenue in the budgetary funds ....................	(13,000)
Net deferral of tax revenues .................................................	(22,575)
Intergovernmental revenues recognized in the financial statements and not recognized
in the budgetary funds ....................................................	23,444
Other revenues recognized in the financial statements not recognized in the budgetary
funds ..................................................................	17,396
Expenditures recognized in the financial statements not recognized in the budgetary
funds ..................................................................	(15,468)
Loans and notes receivable repayments received by debt service fund included in budg-
etary revenues ..........................................................	(14,899)
Deficiency of revenues over expenditures and net other sources (uses) of financial re-
sources — general, special revenue and debt service funds ......................	$( 2,329)
17